Fresh from releasing his exhaustive 230-page annual report titled In Gold We Trust, Ronald Stoerferle joins us to summarize his forecast for the yellow metal.
Stoerferle, an author of several books on Austrian economics and head of strategy and portfolio management at Incrementum AG, concludes that gold is extremely cheap right now in dollar terms. And he sees a new bull market beginning for the precious metal — one likely to quickly build momentum as the next (and long overdue) financial market correction arrives.
We're at the beginning of a new stage of a bull market.
We've seen a massive correction with a big drawdown, but we're now seeing the Commitment of Traders report suggesting that there's been a washout. We're seeing that sentiment is really negative. We're seeing that nobody really cares about gold and mining stocks, and especially about silver. Silver is probably the biggest contrarian investment, though silver mining stocks are probably even more contrarian at the moment.
We all know that the herd behavior in the sector is getting more extreme. I think it has got to do with career risk in the financial industry, so nobody really wants to make a contrarian call. But once we go above this $1,360-$1,380 resistance, which is also the neckline of a large inverse head & shoulder formation, I think gold will hit $1,500, $1,600 pretty quickly.
The most important thing is: in comparison to all the monetary printing that we've seen in the last couple of years, gold got significantly cheaper. Gold, in monetary terms, is dirt cheap at the moment. We're basically at the same levels like in 1971 when it comes to the gold backing of the US dollar. So gold is a bargain at this level.
Of course, we need some sort of catalyst. I think one of the main catalysts will probably be recession fears coming up and the greater volatility in equity markets that's going to go hand in hand. And we’ll see it sooner or later.
We should not forget that stocks have been trading at or close to the all-time highs, that real estate has been doing really well, that bond markets have been doing well, that cryptocurrencies have been kind of stealing the show, that people regained trust in the financial system, in banks, and even in politicians. Inflation is not a big concern at the moment. We're seeing rising rates and so on. Let's face it: those things are not an extremely positive environment for gold. But still, it's been doing pretty well.
If those headwinds become tailwinds, meaning that there will be some volatility kicking in in equity markets, that the bond markets start cracking, that people start losing trust in the system again — early indications of which it looks like we may be seeing here in 2018 — that's going to be the point in time when gold will pick up momentum big time.
And the other big thing is that the whole world is increasingly trying to diversify out of the US dollar. We're coming to a multipolar currency system sooner or later. That's a long process. This year we've seen the introduction of the oil futures in Shanghai — that's a really big development — volumes are enormous in Shanghai. Nobody would have expected that. And that's just another nail in the coffin of the US dollar. And, of course, all those countries that are trying to avoid the US dollar in their trade, they are big holders of gold. So I think within the course of the next crisis, I think there's might chance of a revaluation of gold.
Click the play button below to listen to Chris' interview with Ronald Stoeferle (49m:22s).